Question: Please justify your answer If the short-run aggregate supply is shaped by the Lucas Islands model, and if each producer expects a 5 percent increase

Please justify your answer If the short-run aggregate supply is shaped

Please justify your answer

If the short-run aggregate supply is shaped by the Lucas Islands model, and if each producer expects a 5 percent increase in general prices each year, and if- as such, the volatility of general prices is 0, solve for equilibrium prices and output if P=v-WY is the AD relationship. Explain all your steps. (10 marks)

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